Which One of the Following Statements Correctly Describes a Credit

question 273

Multiple Choice

Which one of the following statements correctly describes a credit instrument?

• A) All credit sales of a commercial nature are accompanied by a promissory note.
• B) A time draft requires payment at the time the goods are delivered.
• C) A commercial draft is signed once the goods are received in good shape by the buyer.
• D) A banker's acceptance is a sight draft for which payment has been guaranteed in the future by a bank.
• E) Under a conditional sales contract, the seller retains legal possession of the good sold until the sales invoice has been paid in full.

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Definitions:

Break-even Point

The financial state in which total revenues equal total expenses, and there is no profit or loss.

Variable Cost

Costs that vary directly with the level of production or the volume of services provided.

Fixed Expense

Costs that remain unchanged over a specified period despite variations in business activity levels, such as lease payments or salaries for permanent staff.

Break-even

The point at which total costs and total revenues are equal, meaning no profit or loss is incurred.